The current trend of geoeconomics favours enhancement of investment and trade relationships with reliable partners. The Comprehensive Strategic partnership between India and Australia announced in June 2020 along with agreements on providing mutual logistics access enhancing defense and security cooperation, and stepped-up collaboration in critical and emerging technologies provided a spur to their ties. Their partnership in the Quad and participation in Malabar exercises has reinforced their shared security outlook. The Australian, Indian and Japanese Trade and Commerce ministers have also met thrice and announced broad contours of a Resilient Supply Chains initiative.
An India Economic Strategy to 2035 Report, launched by Australia in November 2018 and a reciprocal Australia Economic Strategy Report released in 2020 by India have both laid down the roadmap for the future. The Australian government’s update to the 2018 report has just been released on 22 March 2022 – it has responded to the rapidly changing global developments, the need to ensure safe and secure supply chains, and the ongoing Indian reforms and developments in the country. Australia also announced initiatives in the update, totaling US$ 210 million, to address the bilateral investment cooperation in emerging sectors such as critical minerals, clean energy, cyber and critical technologies and space as well as the priority sectors of infrastructure, education, tourism, agribusiness and energy. At their second virtual Summit on 21March, 2022, the two Prime Ministers agreed to boost cooperation in critical minerals and mobility of students and professionals.
India has emerged as an ideal strategic partner for Australia as it strives to overcome the challenges of rapid urbanization and infrastructure development, resources like clean water, digital connectivity and health amenities for its growing and aspirational population. There are excellent prospects for collaboration between India and Australia in some critical areas like science, vaccines, pandemic management, space and defense, critical minerals and related technologies, water resources, training and education, the circular economy, waste to wealth processes, grains management and logistics, and cyber technologies. India needs Australian commodities like Lithium, Cobalt, Vanadium, Rare Earths, Coal and LNG for its development needs, as well as technology to solve problems in areas such as financial inclusion, healthcare, and education, jointly with Australia. Australia has reserves of 21 of the 49 minerals identified as critical for India’s future strategy, especially the e mobility programme. The new Education Policy in India has opened up possibilities for further collaborations with Australian Universities. New possibilities for collaboration have opened up in the defence and space sectors. India has a large technology resource pool which is complementary to Australian requirements. Australian Super funds and infrastructure companies are presented with increasing opportunities in the infrastructure and toll roads sector.
Investments are already driving the trade relationship between India and Australia – roughly US$20 billion has been invested by them into each other’s economies. Bilateral trade this year is poised to cross US$27 billion. However, liberalization of trade and services, and steps towards ease of doing business will add immensely to this momentum. There is thus new optimism after the signing of the Australia India Economic Cooperation and Trade Agreement (AusInd ECTA) on 2 April 2022 between the two trade ministers in the presence of the respective prime Ministers. This agreement is to be followed by a second phase of the Agreement by the end of 2022. Both sides have been trying to achieve this result since 2011 – efforts were stalled in 2015 after nine rounds, but a relaunch of the negotiations by the trade ministers in September 2021, and the last mile push by the Prime Ministers has been evident in this effort. Goods, services, trade remedies, rules of origin, sanitary and Phyto sanitary measures, technical barriers to trade, customs procedures and trade facilitation, and legal and institutional issues including dispute settlement, temporary movement of natural persons have been included in the agreement, which will cover most items of bilateral trade. Specific areas of interest to both sides in the services sector such as financial services, telecommunication services, professional services, and foreign investment framework have also been spelt out . Over 96.4% of India goods by value 98% by tariff lines) will get zero duty access on day one of the pact coming into force, with the rest set for phased concessions. There will be immediate nil duty on 85% of Australian exports from the first day, and nil to low duty on 30% tariff lines in 3-10 years. India will gain from duty free access for a host of labor-intensive sectors like textiles, gems, and jewelry, leather and footwear and from a liberalized visa regime allowing easier movement allowing easier movement of the professionals. Sensitive sectors like dairy, sunflower oil, wheat, rice, walnuts, medical devices, beef etc. have been kept out of the agreement, while Australian wines will see reduced duty from 150% to 25% over a period of 10 years in two categories, thus taking care of the Indian domestic wine industry. Australian coal which attracts 2.5% duty will also enjoy duty free access. The rationalization or elimination of tariffs will boost existing bilateral trade, and encourage investments in both countries. Liberalization of the services sector with enhanced Indian access in about 135 sub-sectors and MFN status in 120 subsectors, as well as market access to Australia in 103 subsectors and MFN status in 31 sub sectors from the 11 broad service sectors will encourage flow of professionals and lead to reinforcement of each other’s economies. Corporates in India and Australia will now look at the opportunities provided by this agreement with renewed interest.
(The author is a former Secretary (East) in the Indian Ministry of External Affairs and has served as Ambassador to Italy, Thailand, Oman and Poland. Currently, he is a Distinguished Fellow with the Vivekananda International Foundation, New Delhi and led the preparation of the comprehensive CII- KPMG Australia Economic Strategy Report released by Minister Piyush Goyal in November 2020. Views expressed are personal and do not reflect the official position or policy of Financial Express Online. Reproducing this content without permission is prohibited).
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